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Income Tax Appellate Tribunal, DELHI BENCHES : G : NEW DELHI
Before: SHRI R.S. SYAL, AM & SHRI C.M. GARG, JM
Date of Hearing : 11.01.2016 Date of Pronouncement : 11.01.2016 ORDER
PER R.S. SYAL, AM:
This appeal filed by the Revenue is directed against the order passed by the CIT(A) on 3.7.2009 in relation to the assessment year 2006-07.
The only issue raised in this appeal is against the allowing of deduction of expenses amounting to Rs.1,45,45,673/-, which was disallowed by the AO on the ground that the assessee had not carried out any business activity during the year.
Succinctly, the facts of the case are that the assessee company is engaged in the business of distributing the Hallmark Channel in India.
On being called upon to explain as to why the expenses claimed by it be not disallowed as no business activity was conducted, the assessee submitted that it was set up in 1999 and entered into an Agreement with M/s Modi Entertainment Ltd., for taking their services in the distribution of Hallmark Channel in India. This Agreement was stated to have expired in December, 2004, after which, it started negotiating with other agencies for distribution of the Channel. The assessee further submitted that the process of negotiations reached a crucial stage when the assessee’s parent company was acquired by a new set of entrepreneurs in April, 2005 and the new owners took some time to settle in and process the negotiation with different agencies in India when the business activity was started. Not satisfied with the assessee’s contention, the AO came to hold that in the absence of any business carried on by the assessee, such expenses amounting to Rs.1,45,45,673/- were not allowable. The ld. CIT(A) overturned the assessment order on this issue and allowed deduction for expenses by observing that the business of the company was in continuation though at a lower level. The Revenue is aggrieved against the allowing of deduction of such expenses.
After considering the rival submissions and perusing the relevant material on record, it is observed that the assessee company during the year earned subscription fees of Rs.18,900/-, apart from earning rental income and interest on bank deposits. It is apparent that the Hallmark Channel was running as the assessee announced advertisements for telecast of movies for 20.11.2005 for the month of March, 2006 for which the assessee paid subscription to Cable TVs for the period 1.12.2005 to 28.2.2006 and from 1.3.2006 to 31.3.2006. The assessee also paid decoder rent to Cable TV for the period 1.3.2006 to 31.3.2006.
The above narration of facts amply demonstrates that the assessee was engaged in business during the previous year relevant to assessment year under consideration and also earned subscription fees, even though it was at a lower level. The view point of the AO that no deduction of expenses could be allowed because no business activity was carried on, in our considered opinion, has been rightly rejected in the first appeal.
We, therefore, uphold the view taken by the ld. CIT(A) in allowing deduction of such expenses.
In the result, the appeal of the Revenue is dismissed.
The order pronounced in the open court on 11.01.2016.